The critical factor for the success of an advisory firm is its ability to attract and retain talented people. Technology, efficiency, investment process, etc., play big roles. But at the end of the day, the firms that can find the best people are the ones that will be the fastest growing and most profitable.
A service firm is much like a sports team. The strategies and the quality of the field can contribute to success, but really nothing is as important as the players—their talent, their motivation and their ability to play together.
That’s why it’s important for advisors to give these people a career track. This helps talented people understand what their role in the firm is today and what it will be in the future. A career track gives people reasonable expectations for their success in a firm and lets them know how they will benefit financially, intellectually and socially.
A career track helps in two ways:
1. It creates reasonable expectations. All the people on a team want to know what will happen to them next. Even if they seem to have no ambition for titles or money, they still want to plan for the future. They will likely ask, “Why should I invest my efforts and talents in your firm? Will I be successful if I do? How do I know I can trust you to lead me to success?”
A career track is not meant to be a guarantee for success, but it helps employees feel less anxious about the future.
2. It motivates people. Employees should have some enticement to achieve, and these enticements should correspond to the values of the firm. A progression where everyone “graduates” and the rewards are token is not motivating. Also, the employees must trust the leadership.
What Is The Career Track?
The idea of what makes a career track in the advisory world is constantly being refined. After all, this is a young industry that is still discovering its best practices.
Furthermore, a career track will not look the same for every firm. That said, large firms tend to offer the following four positions on the path:
1. Partner. A “partner” is an owner, a leader and a mature professional. (He or she could also be called a principal, an owner, etc.) While “partner” is not a job description, per se, it signifies the highest level of professional and business responsibility and is usually the top step on the ladder. “Making partner” is typically the final goal of the most ambitious employees.
2. Lead Advisor. Lead advisors are responsible for independently managing client relationships and guiding clients through their wealth management and investment decisions. (They can also be referred to as “senior advisors,” “wealth managers,” “senior planners,” etc.) They are the people the client looks to for guidance. They may get support from other staff, but they are the ones who have to answer difficult questions. They are often responsible for building new client relationships. And they should be responsible for training less experienced advisors. Many partners also perform these roles, of course.
3. Service advisor. These people are responsible for helping clients with variety of routine issues. (They are also known as associate advisors, relationship managers, advisors, etc.) They work under the direction of lead advisors, but the lines can get blurry here, since service advisors often work independently.
In a large firm, the service advisor is usually part of a defined service team and may work for one specific lead, but other firms may put a service advisor under several leads, depending on the relationships.
4. Analyst. This is the entry level position. (This person can also be called a “paraplanner,” a Level 3 advisor, a junior advisor, etc.) Analysts also help the lead advisor but typically do not meet with clients alone. They may be members of a team consisting of a lead, a service advisor and an analyst, or they may work directly with a lead.
No Hard And Fast Rules
One tricky area is compensation. Every firm should examine its compensation philosophy first before working on a career path for its employees. But a career track should not be focused on “how much?” but on the responsibilities and the progression of an employee’s skills and contributions. The rewards should be part of that, but every firm needs to figure out its rewards for itself.
In the same vein, tenure or experience should NOT be part of the career track (though some experts will disagree with this). This is because some people travel through their careers fast and others take more time, even if they achieve the same result. Just because someone survived at his desk for 15 years does not mean he should become a partner in a firm. Nor should someone who has been in the industry for 20 years automatically become a lead advisor, any more than a slow marathon runner should get a ride in a car through the last leg of the course. It might sound brutal, but if everyone makes it, the run becomes meaningless.
Career Permutations
Many firms do not use the four positions I’ve listed here. Some do not recognize the “partner” role as a step on the ladder. They look at it instead as an investment decision available to many employees. This is a valid approach. (My tendency to put “partner” as the top step is likely my personal bias having come up in a large public accounting firm.) But there is still a good reason that a partnership is an important career step, everywhere from Goldman Sachs to the advertising firm on Mad Men.
Nor do firms always treat their lead advisors the same way. Some firms think of leads as business developers, and leave the client relationships to the service advisor. Again, this is perfectly valid. But it could cause trouble later if the firm keeps making the statement “Sales are not that important” yet only promotes those who sell.
Other firms give sales chores only to the partners. Again, if that is the case, it should be consistent with the values of the firm. And it is better stated and fully disclosed, rather than implied, unstated and perhaps disguised.
Other firms (usually those with less than $5 million in assets per client) have no analyst position, but instead combine the roles of analyst and service advisor (particularly those firms who never envision having three professionals in a relationship).
How Specific Should You Be?
A firm’s career track encourages clarity, helps define expectations and ties performance to advancement and rewards. That means a firm owner should be up-front, specific and fully transparent about it.
It doesn’t mean, however, that the career path should be a mathematical formula or a sophisticated spreadsheet that somehow removes human judgment from the decision. That approach might seem like a good idea—it prevents some of the “likes me, likes me not” games that occur in every firm. But most of the qualities somebody needs to advance in a career are not measureable. How do you measure somebody’s ability to earn a client’s trust, for instance?
How do you gauge his or her ability to exercise good judgement in difficult situations? How can you measure somebody’s ability to train other advisors? You might try, but your measures will be incomplete and flawed. The collective opinion of your partners might seem subjective, but they will be much closer to the truth.
Sales And Progress
What if someone is very good at service but can’t bring clients to the firm? Should his career stall? In other words: Can you be a partner without developing new business?
Every firm should answer this question on its own. The decision will make a deep statement about the values of the firm and will have a very profound impact on its culture.
But personally, I think the answer is fairly simple. Partners and leads should be able to develop new business—just as every water polo player is able to swim, every boxer able to punch and every soccer player able to run. It is fundamental to what they do. Without it, a career is possible but limited.
Selling is difficult. It is not comfortable; it often makes you feel vulnerable if you are not successful. If there was a way to avoid it, a lot of people would.
But that’s the problem. Firms often misguide their young professionals in letting them believe they can avoid sales, and that will harm their promise.
Whereas, if they simply developed these skills, and patiently developed their networks over many years, they would find that selling is not so difficult.
Your firm needs to grow, and to grow someone will need to sell. Ask your professionals to develop that skill gradually and patiently so that they won’t have to knock on doors some day.
Conversely, every healthy firm should have some partners focused not on sales but operations, investment management, financial planning, etc. For every four, five, six or 10 partners who can develop business, a firm should consider rewarding one in operations or some other specialty area. It would only be problematic if it were the other way around—if there was one business developer for every 10 technicians.
Tenure And Career Progress
Again, tenure should never be a guideline for career progress. I know many firms disagree and prefer to reward “loyalty.” But the danger of rewarding tenure is that slow or even underachieving employees can block the progress of more motivated people. What if you have a very talented young person who is hungry and moving fast but has to wait in line for someone who has been around longer yet doesn’t generate the same results?
The question should be, “Who are the people who can best help us achieve our goals?” In that mentality, results matter the most and other factors (like loyalty) are relevant only to the extent that they increase the chances of success (loyal teammates may help everyone perform better by not using energy to compete with one another).
A lot of it is a matter of the firm’s philosophy. What behaviors should be rewarded? Some firms tend to focus on “taking care” of their people (this is how families operate; once you are in the family, we take care of you no matter what). In such an environment, it makes sense to reward tenure, loyalty and similar values. And in a prosperous and growing industry, it is easier to focus on these “softer” values than it is in a very competitive and slow-growing one.
But without performance, eventually a firm will not be able to advance anybody’s career.
What If Somebody Stops Progressing?
Top consulting firms like McKinsey & Company and Boston Consulting Group are famous for their “up-or-out” policy. Every two years, associates are either promoted or let go. This is an extreme example of encouraging progress through the career track. The approach tends to think of every spot on the team as a valuable asset that bestows training and opportunities on the holder, and the firm requires a return on that investment. Notice that NFL teams who are held to the limit of 54 roster spots tend to function in the same way—you either show progress or you’re out.
There is an inherent potential friction between career achievement and teamwork. After all, not everyone will become a partner and not everyone will progress. Yet all advisors have to work well together, just as professional sports teams do.
Many firms struggle with the question of whether they can have a career track without making the top employees owners. The decision to expand ownership is a difficult one and may not serve the goals of the founders.
In my mind, however, it is very difficult to have a career track without allowing the best employees to become owners. Nothing shows as clearly and as truly what is important and valued at a firm than the criteria for the ultimate prize. The decision to “promote” the first partner internally is perhaps the biggest achievement of an ensemble firm. There is no better way to express the value of working together as one firm than sharing the profits and value with some of the best people. How and when you do it makes a very strong statement about the nature of your firm.
When And Where Do Careers End?
When I was eagerly working toward a partnership at Moss Adams, I tended to see it as the finish line of a marathon—that glorious moment of triumph that makes it all worth it. It was going to make me happy, successful and rich. At that point, Bob Bunting, the chairman, told me something I always remembered. He said, “Making partner is not the end of your career. It is just the start of it.”
It means going from being a practitioner to being a business owner. It means you have a new set of responsibilities and challenges to conquer. It did not make me rich. I have had my happy and unhappy days. But partnership introduced me to the next step.
When you climb a mountain, the view is spectacular, but what you usually see is other mountains worth climbing.
Philip Palaveev is the CEO of The Ensemble Practice LLC. Palaveev is an industry consultant, author of the book The Ensemble Practice and the lead faculty for the Ensemble Institutes. More information about the institute and the book can be found on the Web site for the Ensemble Practice (www.ensemblepractice.com).